President Obama supporters and protestors gather outside the Phoenix Convention Center in Phoenix, Monday, Aug. 17, 2009. Obama is scheduled to speak at the Veterans of Foreign Wars 110th Convention at the convention center later in the day. (AP Photo/Matt York)

Photo: Matt York, AP

President Obama supporters and protestors gather outside the...

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GRAND JUNCTION, CO - AUGUST 15: Prostesters demonstrate against Democratic-sponsored healthcare reform at a rally ahead of President Obama's visit on August 15, 2009 in Grand Junction, Colorado. President Obama was to arrive later in the day to hold a town hall meeting on healthcare reform as part of his swing through three western states. (Photo by John Moore/Getty Images)

The spotlight has turned to health care "cooperatives" following hints over the weekend that the Obama administration might be backing away from a government-run option as an essential component of the effort to overhaul the health system.

Health co-ops have emerged as an alternative to the controversial public plan because they aren't controlled by the government, but could offer a competitive marketplace for affordable coverage. The powerful Senate Finance Committee, which has yet to release its health reform bill, is reportedly considering the option.

Co-ops are nonprofit, member-owned entities that could operate on regional, state or national levels, negotiating rates with providers for the benefit of the members. Beyond that very vague description, little is known about exactly how health co-ops would operate and whether they would satisfy supporters of the public option.

Several lawmakers say a public option is required if health reform is to succeed, but some health care experts contend it's too early to determine whether a cooperative - which would ostensibly operate under more government regulation than the current marketplace and be offered in place of a public plan - can't accomplish the same goal.

"It all depends on what rules are put in place about who is eligible, how provider reimbursements and premiums are set and how the 'thing' - whether a public plan or co-op - is governed," said Marian Mulkey, senior program officer with the California HealthCare Foundation in Oakland.

California offers examples of health plans that function similar to cooperatives, though it would be difficult to predict the success or failure of co-ops based on the state's experience.

"California has some really positive examples, though not identical but very similar, to cooperatives," said John Ramey, executive director of Local Health Plans of California, which advocates on behalf of eight local nonprofit, publicly governed managed care plans in the state.

Ramey points to his group's members - which include the San Francisco Health Plan, Alameda Alliance for Health and the Contra Costa Health Plan - as examples of nonprofit entities that compete with private insurers for Medi-Cal members. "They've operated very successfully and competed with commercial health plans," he said.

A key difference is that these plans are not member owned, which is part of the definition of a cooperative. In addition, the plans are limited to those on Medi-Cal, which is the state-federal health program for the indigent.

Theoretically, the plans could be expanded or additional co-ops could be created nationally, by states or within regions to include people not covered by government programs, said John Grgurina, executive director of the San Francisco Health Plan.

"Could California work with us to fill in other areas and come up with a co-op structure to offer that is an option in an exchange? Absolutely," he said.

An exchange is another important element of the health debate. It is a marketplace in which people could obtain or buy health coverage - be it a private plan, a public plan or a plan run by a cooperative. Both the House and the Senate versions of health reform include an exchange.

Grgurina led a small-business health insurance exchange for California, which was run originally by the government but later by a nonprofit organization.

It operated for 13 years, but the statewide purchasing pool, known as PacAdvantage, eventually went bust in 2006 after the number of insurers and workers dwindled, leaving the exchange with a relatively unhealthy and expensive population.